The fossil fuel industry and its alternative facts

In a post-truth world, the ability of an industry to generate its own "alternative facts" is likely to be an asset in the short term and a liability in the long term. Indeed, for those who crave certainty and value continuous disclosure, the willingness of some firms to move well beyond simply putting a positive spin on events is a significant new investment risk.

[This article was originally published by The Australian Financial Review - here]

Much has been made of politicians' increasing penchant for alternative facts. But in Australia, where politics is simply the extension of business by other means, the economic implications of business leaders simply making things up to help themselves and hurt their rivals is significant. Take the energy debate, for example.

Imagine if the nascent Australian battery industry was as effective in making their voice heard as the fossil fuel industry. Imagine if newspapers explained that, as the name suggested, baseload power stations can't possibly ramp up supply to meet peak demand events. And imagine if the implications of the rapidly declining cost of solar panels (which produce most of their energy at times of peak demand) and battery storage were discussed in the context of building a more efficient electricity system that was better able to match supply and demand.

Imagine away, because in Australia the PR machines of the fossil fuel industry have ensured most people "know" that because the sun doesn't always shine, the presence of renewable energy equals unreliability. The "fact" that South Australia has lots of wind turbines and recently experienced a spate of blackouts is "proof" of the link, even though FOI documents show that the government was advised to the contrary within hours of the storms that first caused the state to "go dark".

But, while the battery industry has focused on R&D instead of PR, the gas industry has done an outstanding job of using a short-term shortage of electricity to push for a long-term increase in their ability to export gas. The fact that the two issues have almost nothing to do with each other is simultaneously proof that their PR machine is humming and that the Australian policy debate is broken.

Gas industry furphies

As Australia baked through its hottest summer, gas industry boosters argued that high electricity prices were not caused by record demand but by the restrictions on coal seam gas exploration. Removing such restrictions, they say, would "put downward pressure on price". Like most alternative facts, it doesn't stand up to much scrutiny, so let's try some.

First, as low world gas prices are the main cause of the financial woes of the Australian gas industry, it would be odd for them to hope to drive prices lower by making significant new investment in gas supply.

Second, thanks to the massive $60 billion over-investment in three separate gas export facilities in Gladstone, the gas industry is desperate to secure new sources of supply to ensure high utilisation levels at their loss-making export facilities.

Third, the gas industry knows that the problem with the electricity market is big peaks in demand, not a shortage of "baseload power". The Australian Financial Review reported last week that AGL was reluctant to build a new gas-fired power plant in SA unless there were changes to the electricity market that "would make a project that would only run about 3 per cent of the year viable".

Solar panels produce energy for more than 3 per cent of the year. Batteries could soak up spare "baseload" power at night or wind energy on windy days. But the relative size of industry PR machines, rather than the relative cost of the competing technologies, means that it's OK to discuss the need to redesign the rules of the electricity market to make new gas viable, but that it is off-limits to suggest redesigning the rules to facilitate more renewables, batteries and demand management to help meet peak demand problems.

Saying that we can't expand renewable energy because there aren't enough batteries in the system to ensure reliability is like saying car use would never catch on due to an early lack of petrol stations in remote areas. No doubt the horse and rail industries tried to make such arguments, but somehow I doubt that those industries invested as heavily in PR and lobbyists as the fossil fuel industry does today.

>> Share this Page

The Australia Institute is the country’s most influential progressive think tank. We conduct research on a broad range of economic, social and environmental issues in order to inform public debate and bring greater accountability to the democratic process.